THE JFSC FINANCIAL CRIME EXAMINATION UNIT (FCEU) EXAMINATIONS – WHAT TO EXPECT

The Financial Crime Examination Unit (FCEU) is a specialised team within the Jersey Financial Services Commission (JFSC).

Established in 2019, the FCEU focuses on examining and ensuring compliance with systems and controls designed to prevent, detect, and report financial crimes such as money laundering and the financing of terrorism. and from 2022/23 proliferation was added.

KEY FUNCTIONS OF THE FCEU:

1. Examinations: The FCEU conducts thorough examinations of financial services businesses to assess their adherence to AML/CTF/CPF regulations;
2. Feedback and Reporting: After examinations, the FCEU provides detailed feedback to the businesses, highlighting areas of compliance and areas needing improvement. They also publish public reports summarising their findings; and
3. Awareness and Training: The unit works to raise awareness about financial crime risks and the importance of compliance among employees of financial services businesses.

IMPORTANCE:

• The FCEU is critical in maintaining Jersey's reputation as a well-regulated financial centre by ensuring businesses implement effective systems and controls to combat financial crime.

WHAT DOES AN FCEU EXAMINATION INVOLVE?

• The FCEU has published its visit process, and this process is shown below

FCEU EXAMINATIONS HAVE A THREE-STAGE PROCESS.

• During the planning stage:
  • Supervised person is informed that they have been selected for examination, and initial requests for information may include: 
    • Policies and procedures;
    • Registers;
    • A sample of customer files; and
    • Etc.
  • A preliminary meeting is held during which a supervised person meets the examination team, who will provide an overview of what to expect.

• During the fieldwork stage:
• Examiners undertake a desk-based review of the information received from the supervised person; and
• Examiners also prepare for and attend the supervised person’s office for the onsite section of the examination.
• The reporting stage:
  • The period during which the examination report is drafted;
  • Any factual inaccuracies are raised;
  • The final report is issued to the entity; and
• Follows the onsite examination, AND It covers:

2025 RECENT CHANGES TO THE JFSC PROCESS

• The Financial Action Task Force (FATF) cites the risk-based approach to preventing money laundering, terrorist financing, and proliferation financing as the cornerstone of its Recommendations.
• The JFSC revised its process in 2023 with an enhanced risk-based approach central to the changes.
• The JFSC aim to effectively utilise its resources by focusing on those risks that could cause the most significant harm to the JFSC guiding principles.
  • The Jersey Financial Services Commission (JFSC) operates under several guiding principles to ensure effective regulation and maintain Jersey's reputation as a leading international finance centre. These principles are: 
    • Reducing Risk: Minimising the risk of financial loss to the public due to dishonesty, incompetence, malpractice, or financial unsoundness of financial service providers;
    • Protecting Reputation: Safeguarding and enhancing Jersey's reputation and integrity in commercial and financial matters;
    • Economic Interests: Protecting the best economic interests of Jersey; and
    • Countering Financial Crime: Combating financial crime both within Jersey and internationally.
  • These principles guide the JFSC in its regulatory activities, ensuring that financial services businesses operate with high standards of integrity and effectiveness.
  • Would you like more details on how these principles are applied in practice.
  • About us — Jersey Financial Services Commission https://www.jerseyfsc.org/about-us/
• These changes to the process were introduced in Q4 2023 and developed in 2024.

THE KEY CHANGES INTRODUCED ARE AS FOLLOWS:

• The scope of each examination will differ depending on the known or perceived areas of most significant risk for a supervised person.
• Previously, financial crime examinations considered an entity’s systems and controls against the requirements set out in all relevant sections of the Handbook.
• Examinations now focus on specific aspects of the regulatory framework.
• It will include a selection of the following themes:
• BUSINESS RISK ASSESSMENT (BRA) AND GOVERNANCE
• SYSTEMS AND CONTROLS
• THE ROLES OF THE MONEY LAUNDERING COMPLIANCE OFFICER (MLCO) AND MONEY LAUNDERING REPORTING OFFICER (MLRO)
• IDENTIFICATION MEASURES
• RELIANCE AND EXEMPTIONS
• ONGOING MONITORING
• SANCTIONS
• SUSPICIOUS ACTIVITY REPORTS
• EMPLOYEE SCREENING
• TRAINING AND AWARENESS

BEFORE THE VISIT – INFO REQUEST

• Examiners now email initial questions to a supervised person before the onsite section of the examination.
• This enables us to understand a supervised person’s business and control framework in advance, allowing for a more focused approach to questions and interviews during the examination's on-site element.
• As a result of the more focused scope, the onsite section of the examination generally takes one week, with the end of the onsite examination marked by a meeting (referred to as a “closing” meeting) in the week following the visit.

WHAT HAPPENS AFTER THE EXAMINATION?

• All supervised persons who have been examined receive direct written feedback from the examination team, usually in the form of a report.
• Once the final report is issued, the supervisor must prepare a formal action plan to remediate identified deficiencies and set out completion timescales.
• This must be submitted to the supervised person’s supervisor within 20 working days after the FCEU issues the final report.

• Read JFCS GUIDE ON REMEDIATION - https://www.jerseyfsc.org/industry/guidance-and-policy/remediation-action-plans/

JFSC EXPECTATION TO READ PUBLISHED REPORTS AND ACT ACCORDINGLY?

• The JFSC expect the board and senior management of all supervised persons to:
• Review relevant feedback papers and guidance notes. The JFSC publish.
• Consider that information against their arrangements and identify deficiencies or areas for enhancement.
• Take appropriate and prompt action to remedy deficiencies identified.

SOURCE

https://www.jerseyfsc.org/industry/examinations/examination-findings-and-questionnaires/financial-crime-examination-feedback-2023-2024/

Financial crime examination feedback https://www.jerseyfsc.org/industry/examinations/financial-crime-examination-feedback/

JFSC Financial crime examinations [FCEU] feedback published https://www.comsuregroup.com/news/jfsc-financial-crime-examinations-fceu-feedback-published/